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By Aynur Karimova

A memorandum signed at a forum in St. Petersburg on June 19 promises a critical turning point that could lead to the political and economic disintegration of Europe. The agreement could introduce new routes for natural gas supplies throughout Eurasian while giving Greece the opportunity to realize its dream of surviving its default and become an energy hub.

Russian Energy Minister Alexander Novak and his Greek counterpart Panagiotis Lafazanis have signed a memorandum on the construction of a pipeline that will pass through Greek territory, Interfax reported on June 19.

The document signed at an international economic forum, envisages the establishment of a joint company with equal responsibilities in operating the Southern European Gas Pipeline.

Novak said Russia will assist in financing the project. Lafazanis, for his part, stated that the new Greek government is ready to resume talks on the Burgas-Alexandroupolis pipeline.

"Greece is trying to turn itself into an energy hub in the region. And our goal is to ensure that any pipelines could play role in the development of stability in the region. To this end, Greece is trying to conduct a multi-vector energy policy. It does not go against any country. It does not give an advantage to anyone. We want to equally cooperate with all the actors," he said.

Russia plans to cut gas supplies going to the EU via Ukraine from 2019 and export gas through Turkey and Greece. Russian officials say Ukraine is “an unreliable transit country” and as a result, they wish to redirect gas flows thought Greece.

However, Greece is one of the most problematic countries in the EU. The Greek sovereign debt crisis is believed to be one of the primary contributors to the decline of the euro. Against this backdrop, calls are increasing to exclude Greece from the euro zone.

Greece has several times refused to implement recent international agreements aimed at solving its debt crisis. In early June, the ruling party decided to postpone regular payments to the International Monetary Fund until June 30. Moreover, some Greek politicians have stated that in case of failure to conclude an agreement with its creditors, Greece may refuse payment altogether.

The Greek government also made a decision on June 17 to abandon a deal to sell a controlling stake in Greek state-owned gas operator DESFA to Azerbaijan's state energy company SOCAR.

This decision means that the Greek government feels free not to fulfill its obligations showed in international agreements. And also this begs the question: How will Greece, a country which is mired in debts worth 315 billion euros, construct the extension of the Turkish Stream?

Time is not on Greece’s side. The country's prime minister is being pressured by both creditors and MPs of the extreme left wing of his own Syriza party. If no agreement is reached by then, Greece could lose access to the rescue aid altogether.

Greece also has to make a 1.6-billion-euro payment to the International Monetary Fund on June 30. That country’s central bank has said that if it is not provided financial support, Athens will be forced to default on its obligations.

Negotiations between Athens and its creditors in the IMF and the euro zone over a “cash-for-reforms” deal have broken down, leaving Greece without the resources to pay its debts at the end of the month. A possible way out of this situation could come from Russian financing.

Greek-Russian alliance: give money and have veto

Greece is likely to use an Athens-Moscow alliance as a tool to pressure its euro zone creditors to soften their demands of decreasing pensions and increasing taxes if the country wants to get new loans from the troika.

Greek Prime Minister Alexis Tsipras was in Moscow to hold talks with Russian President Vladimir Putin, a few days before it is required that Greece either pay its debt to IMF or become the first euro zone state to withdraw from the EU.

Experts claim that an alliance with Greece is beneficial for President Putin, but a nightmare for the EU at a time when it is trying to present a united front against Russia. If Greece defaults but remains a full member of the EU, Athens might even veto further EU sanctions against Russia, splitting the bloc.

Some doubt that there will be any benefit for Greece from this alliance.

“He [Tsipras] may make friends there [in St Petersburg] but unfortunately he’s not going to find any money,” said Holger Schmieding of Berenberg Bank. “The Russians don’t have enough money for themselves. They definitely don’t have a lot of money to spare – and certainly nothing that would suffice to support the Greek banks.”

Meanwhile, Russian officials have repeatedly stated that Greece was not seeking financial assistance and that the two countries are working on joint commercial projects, including an extension of a Russian gas pipeline through Greek territory. Russian Finance Minister Anton Siluanov told reporters on the sidelines of the nternational economic forum that Greece has not applied for financial assistance from the Kremlin, ITAR-TASS reported.

EU loses Greece?

The failure of negotiations with international creditors might be the beginning of a path that could lead to Greece’s exit from the euro zone and perhaps even from the European Union, proclaimed a source cited by the Prime Economic Information Agency at the Greek Central Bank.

Some time ago, the EU became nervous about Greece looking elsewhere to get a better deal.

“They fear above all Greece getting closer to Russia, as it ought to historically in any case. Because at the end of the day, they know very well that it is possible to have a BRICS loan with perhaps Russian-Chinese help, with far lower interest rates,” former British diplomat William Mallinson told RT.

Greece's move towards Russia is therefore believed to deepen the divide between Athens and the rest of the EU.

The Russian-Greece alliance will put German Chancellor Angela Merkel in a difficult position as well. Her own conservative party, the German people, and bankers in Frankfurt have all made clear they do not want to continue to pay for Greece if Athens doesn’t heed calls for reform. Merkel, however, is under pressure from Washington to maintain an alliance that won’t upset the apple cart when it comes to sanctions.

“She doesn’t love the idea that Putin would be presented with a gift if Greece is alienated from Western Europe,” Sebastian Mallaby, a senior fellow for international economics at the Council on Foreign Relations told Foreign Policy.

Meanwhile, Merkel has left the path for a deal open, saying Thursday in Berlin that she was “still convinced” that a deal is possible.

But Mallaby believes that outcome is unlikely. He said giving Greece any wiggle room would send a bad signal to other European nations, like Spain and Portugal, struggling under the weight of years of unserviced debt.

UK authorities reported that they have already started developing anti-crisis measures in connection with the serious economic risks posed by the threat of default in Greece and its potential withdrawal from the euro zone.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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